SPS Commerce (SPSC) 28 Oct 222022 Q3 Earnings call transcript

Good afternoon. and welcome to the SPS Commerce Third Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. Please note, this event is being recorded. to for conference SPS like Blaszczyk, to now Relations Investor Commerce. would turn over the Irmina I Please go ahead.

quarter Thank you, us third joining thank you conference Gary. Good afternoon, on everyone, SPS and for XXXX call. Commerce

undertake financial of and our specifically the statements our no forward-looking financial are certain forward-looking result These designed new with our and make on any will our retailers information, results, our and revise factors today, strategy Form traction XX-K We go-to-market risk increase uncertainties statements with future forward-looking documents may SEC respect as including to filings, more a that as otherwise. materially. expected and press website reflect for publicly penetration could our of to obligation spscommerce.com, customers. efforts to website update well are actual risks involve a events or results as detailed differ these refer number results. results the of and only a description statements, at whether affect Please opinions and as SEC's note, date this These statements of or our to the to available sec.gov. our we that cause of call, release Please and other

are our a In Investor addition, website we for on sheet providing Relations historical our easy reference data spscommerce.com. section of

I over GAAP filings release reconciliations posted measures. additional will these our that, adjusted including financial with regarding measures non-GAAP is non-GAAP and comparable disclosures these and our will share. with call of to the the turn of discuss our financial find website, you Archie. measures, we And EBITDA our will measures press today, During call income per SEC, on In which with each

analytics, everyone. amplify to benefiting scale need international from sizes and strong welcome continues automating growth and revenue and complexity automation. and improve grew assortment. dynamics as the results grew enable trading increasing Irmina, in increased million, partners to $XXX.X and brands for throughout With fulfillment the their XX%. supply total revenue efficiencies and XX% revenue of chain with expansion deliver double-digit Suppliers retail to Thanks, workflow, and processes are all recurring fulfillment SPS order

help one is of leisure needed positive Gym+Coffee they experience. Ireland's to to create growing With customer to the largest which order digital were increased of not as and automation, internationally. least EDI they to on and and and prioritize between customer PetSure offer channels delivery business to locations. venture synchronize global order further. a is is and inventory able now Woolworths efficient fulfillment in of For base vendors purchase delivery. their of where day from fulfillment like A expect to and online there well survey market According from or as reach a shipping many a to Etsy are partners advantage benefits Amazon orders. Shopify, management two behalf enables take inventory to survey go, on learning example, consumers that consumers separate and want to businesses to rates offer vast enjoy shipping to of their fast all Gym+Coffee based the and and outsource faster brands are volumes streamline expanded XX% at and that automation fastest of conducted that on quotes company, PetCulture as their a discounted to UPS Brands Australia. able next transformation, XX% a joint across day Linnworks delivery. scale active warehouse scale

help large in to an consumer for the scale and remains like was retailers EDI changing Most bring process across the hours. North As and shopping remain vendors such grocers compliance. one require meet new as inventory they and the right experiences. to Many automation their of retailers critical suppliers while are methods common XX% chain was is a and exchange with Twin they Cups, SPS knew how data And goal EDI necessary assortment continues set customers available signing fulfillment. chain. achieved supply to standardizing InterTrade online stay to business. Target. customer experience PetCulture onboarding part grocery Marquee of the lean, and with America, Safeway by advantage. program. information a competitive our EDI across growing and and supply exchange brands in retailers its most suppliers to recently ensure offering apparel having network onboarding startup a between Their of information chain, general superior strengthen solutions supply merchandise. they expand industries retailers Partnering within automation acquired product readily transaction supplier fast We technical a launch provider new to timely ensure competitive provide for on and to Commerce a retailer, compliance across XX order SPS including the

excited to customers are and employees of InterTrade We growing our community trading have join partners.

become leadership we world's to retail As positions our the strengthen network.

it's For proofs and to key is platforms integration SPS fulfilled of improving suppliers new process facilitates destination, e-commerce final retailers industry, against and alike, how a is Commerce technology automation, the enables its future where and order with the and placed, of automation efficiency. range regardless requirements.

I'll believe We Kim our fuel discuss financial complexity continue it in increasing retail omnichannel the will need results. and over trading the for to chain. With between to supply that continue throughout turn partners to that, automation to

million, to year-over-year. consecutive last a third increased of of grew customers had recurring QX XX% The was XX,XXX wallet Revenue quarter number revenue represented approximately revenue this increase quarter and of XXXX. revenue XX% quarter Recurring year-over-year $XXX.X increased year, to XX,XXX. XX% share growth. over our X% Thanks, Archie. total a great of We XXth and

we July, in reminder, approximately network. a our added to announced XXX which customers GCommerce, of the acquisition As

adjusted of We EBITDA million repurchased last $XX.X ended cash of QX $XX.X shares. grew quarter $XX to and compared to in quarter, of XX% approximately total year. approximately the and million million For with the $XXX SPS million investments

our customers. guidance. in and We industry turning the of dynamics inflationary global and the Now ongoing impact pressure may that retail to economy recognize uncertainties

our partner relationships exchange trading of network. the limited our have driven to in exposure pricing and by we is However, number rate primarily fluctuations foreign structure

our result, expectations model our growth short a and As and unchanged. long-term operating remain

the revenue $XXX quarter For of fourth growth. XXXX, million million, year-over-year the to range $XXX in XX% which of we to approximately be XX% represents to expect

We $XX.X be million expect the million. of to $XX.X to adjusted EBITDA range in

expect $X.XX diluted shares. fully range to $X.XX per in share shares fully We million to weighted of of with be XX.X the average diluted earnings outstanding approximately

$X.X expect approximately share We $X.XX of stock-based and to of compensation depreciation per $X.XX expense income $X.X million. expense expense in diluted non-GAAP of with the range approximately approximately be $X.X amortization of to million million,

million we growth XX% representing million revenue year, to in to expect over the the $XXX.X of approximately $XXX.X range For be XXXX.

million, of XXXX. over to be XX% $XXX.X in growth $XXX.X million representing range approximately We expect adjusted to EBITDA the

We approximately of expect $X.XX average be with million $X.XX earnings fully in outstanding of per fully to diluted weighted shares. shares XX share the diluted range to

We income in million approximately approximately expense of $XX.X million, be per expense of million. diluted depreciation the of share expect range $X.XX to $XX.X and the expense non-GAAP compensation $X.XX of stock-based year for to amortization $XX.X with approximately

the quarterly For the XX% GAAP a a calculated year, of model effective on rate investors should remainder pretax tax basis, earnings. on net

expectations network we we acquisitions. Beyond enablement 'XX, growth our campaigns maintain expand of or our greater XX% community and through as annual revenue

$XXX we our We modeling growth. call. adjusted earnings expect XX% year-over-year to EBITDA million QX for XXXX conference $XXX in will guidance million approximately detailed provide to annual XX% in purposes, or on deliver approximately XXXX to But

our open various to to industries to partners across our continue opportunity with Beyond SPS's network expect to I'd in our growth growing of adjusted for long-term, business and that, solutions and large strengthening invest growth. call current XX%. the and position, we competitive the XX% continue In our and consistent leading capitalize trading XX% summary, on EBITDA dollar support EBITDA of questions. to margin future we deliver target like and as profitable to of solidify XXXX, maintain market model we our the expanding to growth. adjusted And ability In

Instructions]. [Operator will the now begin We question-and-answer session.

Blair. Our first go with ahead. is Pfau from question William Matt Please

taking my for questions. nice results, Thanks guys. And

Just on think appreciate macro about it's I wanted a the very to to impact, terms solution. in the sticky that ask of way

How perhaps see on ability you customer You to But pressure retail would to network it did next need about to if the the year? the expect some add suppliers use connect to impacted what new acquisition to to the side? segment be retailers. new

Yes. there's very A during enablement chain on more historically And as efficient. campaigns we've you pressure because the One, to don't efficient their the fast thoughts. actually challenging more add community go way is we up it's know, seen times what a monetize couple efficiency. retailers so supply for of retailer to make retailers, cost

that implementations at it third supplier then change look with different we digital we marketing is down about the community. in continue -- ERP how is a whether major really haven't to of the be times. And seen slow through in be will that will part -- second The

switch massive the of because the mainly few omnichannel that seen years. last haven't We to over

to would be expect continue to we strong. So that reasonably

underneath to takes get the and when challenging tends in within or X%. wash puts out are X% covers retail, times there but So it

Great. then macro be coincidental whether you're acquisitions, XX-month around willing that the on on period Or within are there it three seeing these so you've customers become something else roughly just a sale sell, that in something made Is up XX-month or going coming period? uncertainty here. for to that And businesses more is where else?

where XX these to known people we've of cycles anywhere are two Many long years. from

be said our continue a for we that, be to we're have are opportunities. think do to right have going an out finding there to balance, of for significant that acquisitions continue and we we tend intensity a to looking But to disciplined. cash make We're sense continue to little going increasing bit its we But us. timing. deals Having and look for to we're So us. that around appetite

you guys. Appreciate Great.

ahead. with next Berg question Needham. Scott is from go Please The

I great questions. Hi, have Archie Kim. Congrats I guess and for taking thanks and my two. quarter on

SPS acquisition chains But Or know in tightening does sort trading a loosen needed supply be with Thanks. the was is the one up. be Because that macro. I kind a more years, to as customer the that how as for about a boon. We versus seem it today last pricing container seems to tailwind up, that splash dynamic unwinds, a to the all? the headwind? first yesterday and guess, received Shipping global on a there question retailers any global your point business? is supply The global year on of is change at the that, seem data I of two to But chains of of be partners supply where chains that Matt's ago. talked follow-up loosening

not back that suppliers It seeing to still seems are well-documented retailers, suppliers inventory have coming chain, rates at the -- there's to It which that things that shipping in but obviously, be as excess been suppliers' we're pushes inventory. different the it's correcting, excess doesn't. really supply -- and surprising down

was we've there a pop So it bit will because for who way extreme its where to take were XXXX, of new some suppliers time But a little of that But because been QX to there since back work looking really then, to less for QX, shortages. normal. -- or it really more out. in people of were doesn't

don't or see I a So being tailwind a that either headwind.

found that does I do this we going then technology a I or opportunity integrate have today, a some for forward? in reasons. set be of it I couple to them And customer you're the to meaningful bring looks Is they to migrate PIM InterTrade, your on as that that just acquisition more customers your going cross-sell you PIM their a fulfillment EDI, but as at sector? you're that of Helpful. acquisition are how pure for your with one able also where But it. using more product at own they product to different Got have you solutions acquisition give portfolio. maybe of interesting guess, their look that they look really product them a like

Yes.

the So do for One, very makes lot to cases, And our those platform. a we a to couple we over fulfillment it will have product customer, of platform. a move when ours. things. have a In of they similar sense superior

that becomes pretty So easy.

PIM maintenance call you item. assortment product, an Commerce. what at really item SPS We the it On call it's --

is whoever to the onto what or to InterTrade PIM. information Neiman complementary item it's information a directly Neiman Marcus into can share product, that our -- Nordstrom's and is their assortment InterTrade is happening putting their is supplier platform Marcus where So or

replacement. it's So really and the PIM, a in PIM there's supplier. meant between sitting to retailer a not and be the It's not

that to so multiple which business that use information supplier retailers, can our share And is model. with

very really nicely very they some teams talented product. nice think So work those as to we team very done that They've understands two that product. They together. a come together assortment with complementary product our product that that will things to expect and have be

Great. taking Helpful. my Congrats again and thanks questions. for

Thanks Scott.

is Parker Please ahead. The next from question with Stifel. Lane go

investment the $XXX Curious the Thanks adjusted if in year, acquisitions year? question. think then on Kim million the should provide how for impact to recent big of you at next some the for the looking $XXX guide EBITDA could Yes, And next XXXX? in particular we of priorities taking for gross hi. million. the line margin company about the

Sure.

the on XX%. that on based an question, gave about we implies So EBITDA for of guidance growth XXXX, the just EBITDA

to may to recall may pace earlier expectations that the do actually meaning lower not that year. You line in bottom reason our EBITDA with number growth the primary this more year, and a hiring. was lower or at has is dropping a for The of rate, for our

had as QX an hiring. on earlier So did you may we as people hire we example, in not many as anticipated remember

and We're exiting our we to demands be is XXXX. on a great needs We into expectation going to and that, have see our that in great spot year. made this going progress relative

pressure you're 'XX to However, that expense comparing the the compared of does though in put when 'XX. that of full-year expense in full-year

it in would than 'XX be a a that originally So a therefore, anticipated. way bit at EBITDA is to in simple less. getting EBITDA little growth more an bit you're XXXX from growth And look

of So said the a range the in in higher lower end in another way, little bit 'XX. 'XX, range

on to to InterTrade margin, gross second it question Commerce. about can similar As that gross acquisition, your as you relates think SPS margins the

gross to So based acquisition. expecting positive that call it, a the not we are consolidated a or negative on large, relative margin

that then, it a you saw that's impact. last volumes as quarter, the bit, broader and be know a know retail little Archie, little have maybe environment a have model, themselves appears variance has any And Got seen doesn't more I pricing I to in something but e-commerce this given bit past, uncertain? you huge Thank your on you. Understood. touched in it. but transaction the

that Just if curious seeing you're macro? the in

Obviously declined patterns and Yes, follow picked drop-ship we as that, saw actually transaction I either drop-ship. pace. general slowed We QX, down was would drastically volume The QX. retail. the growth say, e-commerce or brick-and-mortar of up

really see of thing So again, just we're truly Commerce, omnichannel it's in at that, are I one seeing us think But SPS brick-and-mortar. just we being competitive and omnichannel you when is one the we at one advantages retailers. landscape, is of what for instead more competitive is whereas did the the that that true the the suppliers solution and look is of our another our -- activity great -- we going are for we place believe

for Appreciate in taking the Great. quarter. the questions. Congrats

Joe from is with Baird. question go next Please The Vruwink ahead.

everyone. Hi,

customer go to to Just the back Gym+Coffee examples.

So their feeder an of transportation? your supply then for for upgrades possible still ERP it you as is of And and or areas were logistics see from brought of all were chain process. separate the you is see the kind important that the the out representing upgrading warehouse area, like latter supply and sounds activity adjacent this from it part investment business? to systems and like in it Is you chain activity kind they you

lot So switches from of solution. I'd are If ERP, ERP the supplier our to feeders environment, a say for their different retailers. in their different there's integrating they current a

solution, a definition, and by make going NetSuite to a or their either software. you massive not on-prem investment from they're now going to stay hosted solution to DXXX XX-year-old solution, current you're a So have likely with a which that's bought new you're to solution Microsoft, if a into buy a or most

that have in solutions the can't world. -- just challenges with business they are meet needs today's real. -- are our the continues omnichannel be have And very to those is that strong. old So that suppliers They

tends et on cetera, more side. retail that systems, be to far warehouse As the as management

advanced a or one purchases really In do to ship retailer their notice to reasons the the center. behaviors. they different hundreds if from out automate they receiving an want to suppliers. that want need with code to suppliers and information goes So a and have of They Manhattan do thousands label. They their order bar of they start do that, is change distribution corresponding need need to their

enablement event in a of Commerce. change their a management for and in where that's us. come it's big Essentially, environment, their to run all in another that's -- that's another positive program -- that is change we as change suppliers. going So for change positive SPS very a do And an a way be that we anything for is in campaign business

time That's but And to questions, Gym+Coffee I have another Okay. get then it one. in great. only

And merchant. logos last years. that just is want out And to example higher. platform Shopify there's and customers for ask a I land of initially their over yet tracked smaller Shopify potential you've a new they're of the of also wallet maybe your kind years, an of So numbers added steadily think lot couple logos I those quite you couple over a the past and have few there customers the

anything So there you that is potential I about have less is, newer that would XXXX pre-XXXX? you would this any since in guess of cohort onboarded believe rich the are economics you've than of customers kind spoken to question lead or about there

would tell sometimes EDI we've onboarded from. first I that first upsells really over this And to the nice that years is they're it's No. those suppliers you, now done do have XX to XX tend months. their retailer needing for

them as we're them. by Now use in supplier only supplier, but going those if with retailer, rate we obviously, grow that grow can business, that But before we those also we lose It's to customer. higher if retailer to expand with strong. continue they because be with their doing they customers stops us business have right churn it, really one

that are integrate us. call requiring are They're and for of an we automatic them landing upsell activities. new becomes activities, to what just are them and And that customer-driven to some sales-driven those retailers them of some

it you. leave there. I'll great. Thank Okay,

The Rhee Please Jeff next Craig-Hallum. question go from ahead. is with Van

Great, the Kim, thanks for taking Archie. question, hey,

me. the similar couple just just but Archie, a question, So prior I'm maybe always for follow somewhat interested on the cohort. to to in

you're the new on there? size new as the of of coming layering the in observations about are they into suppliers those you're quarter, Any quarter, customers cohorts observations last So cohort that displacing? solutions were any this that or

our less -- that's pays that around drastically. of us year, of have and thousands There's $XX,XXX pay we up then really significant misleading. customers somewhat we bell curve a multiple of customers Jeff, average that $XX,XXX a that changed pay then hundreds thousand hasn't and several us that a but remember $XX,XXX it number It's have than to $X,XXX supplier dollars.

So be what tends that's they're customer done this requiring working often, aren't just of or retailers what smaller less we're more EDI. They've displacing, about to They're cohort, type quite are. than it In $X,XXX, email the before. displacing literally that they with never Fax. smaller

is time the this doing so they're going And first start to that.

either think business a type larger they some they're -- it and on ERP up midsize or growing with keep tends change I the they becoming with is so realize switch. keep be acquisitive legacy changing and demands quickly they just business of the to They're cannot software. size, can't or that event, their up their

So or really it the depending cohort does type on customer, the vary. on of depending

the customer big One you cloud as at been about thinking two, that Is any pockets then that observation would remaining there the to the hold is TAM, of changed the at I per make? out the you guess about is going two there And look TAM, remaining have anything questions. all? just peak to ARPU you're

feel as percentage you we out seems continue and think to go you every like there the growth. good more and got started TAM had While up though year you smaller even it like more of a with, just wake you've there's that opportunity you we

and opportunity, a we're line, only think it I of turning taking lines. -- incredible suppliers when not again, we product to and white existing And space essentially market. So an into campaigns, but in space, doing product additional nothing community addressable very total we're that often, doing we're have our using continue enablement e-mails a group

things the machine one is our of that does. So

they're not I not of think doing not doing have hundreds and as that all of the we we'd partner They're always the relationships, as thing analytics like. deep documents. assortment, They're but is EDI. trading other thousands

continue opportunity ahead So significant -- to be us. have of

Okay, I'll leave guys. it there. Thanks

go Loop question next from Schappel with is Mark Please Capital. ahead. The

may us for quarters if service P&L? think Hi, my just what taking a relatively you're of to introduced a maybe you be of thank carrier product? couple the in solution. pipeline sense wondering ago, you for Archie, And new when you your seeing you of was I terms material solution questions. the could give And the

continue we get there. so products. It a Yes, is traction smaller to add-on

more XX% value. for things add add-on not to revenue. given it's makes the customer supplier is to I challenging mean of a It that Commerce of makes rely going SPS five, displace that harder more never be that for The SPS -- nice an type So going to this, example of us points of for this add-on. on be XX it customer can the a to it's a does they Commerce. it is for displaced. leave be -- It's

It's continue a traction there. the advantage. So to we selling it is a revenue advantage, like

to continue make we So progress.

on And double-digits? little provide growing I think marketplace maybe solution, what you a of said just then your seeing in color bit was you that? earlier, could at with it you're Great. the analytics

at XX% that we'll be we we'll be Yes, believe the mark. -- for year,

were months compared XX XX, is where we ago So encouraging. to really

it, marketplace. fantastic we're some We currently to side. But seeing really where See optimistic. and know is. when that accelerate continue to just it it when in signs It's hard we're extremely it can selling usage on from be the is the

So more sharing are and more retailers data.

but pretty feel optimistic I'd say. I what is So cautiously optimistic

you. thank Great,

next [Operator Please Capital Nehal is Northland Chokshi Markets. ahead. Instructions] go The question with from

A, you that a QX implied B, for is is And from looks guidance. highlighted you my correct? than rate guidance million then for why like call. Yes, the It thank QX few that? is $XXX,XXX like looks contribution that it $X.X less -- previously interest excluding QX taking prior

Sure.

of a ago similar when look XX ago. at you what thousand hundred had you we when So it's acquisition, XX within to adjust couple days the guidance and days thought -- the to about pretty it you for compare

from for not lot take change XX but a days most the So into of our account. guidance part, does ago,

see view to opportunities enablement relates activities Our XXXX. what as into and space, it of QX community in going we the retail

So to ago you acquisition. days pretty once the adjust similar XX for

in correct? Okay, customers great. quarter, then the And XXX incremental

at GCommerce of an the acquisition quarter, When customer about there of mind you the in look XXX. do is keep in number there in that

that is So accurate was that acquisition number is but of added. stated, you that which XXX approximately GCommerce, of part customers an from

Right.

it's lower bit the and is So excluding I GCommerce, in what organically, bit you lot the then than acquired customers What a year, have driver XXX a the period trending which think a of at. of -- was lower been quite the year-ago that?

Sure.

was you keep of about might to lot net in relative last the mind that record a for adding we last high made So the where demand in were customers a number omni-channel. year, and comments we've of year seeing

slightly that consistently higher a pre-pandemic we've similar In customer outlier than or to is adds So be levels. expect general, XXXX, the made net that comments in an positive XXXX. you'd way,

and year, a this with pretty of and or in at outlier than QX community QX had higher would than specific and look actually typical to expected, you have an similar. If the bit timing was quarter. do QX activity the that darn of we higher

it. Got

good. ARR recurring the Very revenue you did about customer? And Okay. give

about information, about, That -- Yes. XX,XXX. it it's call

intentional? $XX share something million that consistently just going big Is then a Or calendar prior that And your quarter final been has that this That's calendar is is of year. repurchases on? year? about per uptick during rate else question from

we as relates the what do capital to it relates that as So cash cash you've flow to seen are company it using positive. because allocation,

buy We to have the stock. opportunity back

capital We of in also the form opportunity have to the put M&A.

of seen the the capital us a remain for company perspective. over You've from years, do both of and opportunities both those allocation those

when we the or happen, the of at did much what every how provide within may we as quarter end far As those quarter.

in So two should and cash that, company that as you of buyback. to it you outside that basically opportunities think form the there's has stock M&A information. use the But of have of that

Okay, thank you.

presentation. for session, you attending now concludes the conference also concluded. This is today's Thank our question-and-answer and

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